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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Institutions: free movement of workers Free movement of workers one of four fundamental freedoms in Treaty of Rome fixed in 1957, came into force 1968 Unique in modern world Allows workers, job-seekers and their family members to move Job-seekers and family members: only of they have sufficient means to spend their living No skill-selection

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Access to welfare benefits Equal treatment grants access to same benefit level in principle New arrivals can be excluded before they work Minimum working times can be requested Exclusion rule for job-seekers from EU Member States included in Social Code II (“Hartz-IV”) in Germany European Court of Justice proves whether rules are consistent with equal treatment principle. Some cases still pending

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets External labour migration policies Admitting third-country nationals remains in domain of national sovereignty Exception: EU Bluecard, which admits high-skilled immigrants if they (i) possess a university or equivalent degree and (ii) earn above an income threshold level of 150 percent of the median earnings Entitles after period of time also for free mobility within EU Does not work: 5,500 in Germany 2014, which is 90% of all EU Bluecards granted in EU-28

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets European asylum policies EU and its Member States have signed Geneva Convention Geneva Convention protects individuals which face individual persecution by wars, civil wars and persecution for political, ethnical, religious and sexual reasons, “no-refoulment” clause Individuals who enter countries irregularly cannot be persecuted if they apply for asylum But there is no visa for humanitarian reasons and the EU penalises airlines, shipping companies etc. if they transport individuals without visa

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets The scale of migration: some facts The income gap between the EU and the other countries on the European continent and its periphery is similar to that between the US and the sending countries in the Americas Step by step migration from the Southern to the Northern EU countries was replaced by immigration from third-country nationals (Turkey, former Yugoslavia, Northern Africa and Middle East, Eastern Europe) The average GDP per capita in PPP of the sending countries of migration in the EU-15 has declined from 60 per cent (1970) to 35 per cent (2005) EU Eastern enlargement and financial crisis involved that today intra-EU migration accounts again for more than 50 per of total immigration in the EU-15 (and in the EU-28 as well) Refugee crisis will result in increasing third-country share

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets The scale of migration: some facts I Net immigration rates in the EU are below those of the US, but tend to converge Spain, Italy, Ireland and UK have been main migrant destinations in the EU from 2000 to 2009 German net immigration was well below EU average on 2000s, but net migration rate recovers in 2010 and increased to 550,000 in 2014, approximately 1.1 million in 2015 Eastern enlargement I: ~3 million people migrated from NMS- 8 into EU-15 between 2004-2014 Eastern enlargement II: ~3.5 million people from BU+RO migrated into EU-15 between 2004-14

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets The scale of migration: some facts II Migration diversion: 60 percent of the NMS-8 immigrants resided in DE and AT before enlargement, 70 percent moved to UK and IE after enlargement 70 percent of NMS-2 migrants resided in DE and AT until 1995, 80 percent reside in ITA and ESP in 2010 Related to selective application of transitional arrangements for free movement, but also other factors: high GDP growth rates in UK, IE, ESP and (less) ITA, English as an additional factor in case of UK and IE Since Eurocrisis, we see a second diversion from old destinations (‘migration magnets’) to Germany, particularly from Spain and Italy 70 percent of German migration surge since 2007 can be traced back to deterioration in other destinations

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Refugee migration Number of violent conflicts and persecution is increasing globally, particularly in regions close to EU UNHCR counts 60 million refugees in 2014, one-third of these reside in other countries This will increase by 10 millions or so in 2015 80 per cent of international refugees reside in neighbouring countries (e.g. Jordan, Lebanon, Turkey, Iran) We can expect influx of 1.5 to 1.8 million refugees into EU Member States in 2015, about three-quarters of these migrate migrate to Germany The highest share of refugees and asylum seekers in the population has Hungary, followed by Sweden and Germany

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets The skill composition of migrants The education level of migrants and other abilities affect the labour market performance of migrants, their effects on native workers and on the fiscal balance of the welfare state Most empirical studies find that the benefits from migration increase with skill level of immigrant population via the labour market channel via the welfare state channel

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Is the skill composition relevant? The labour market channel The unemployment rate of migrants is about twice as high as that of natives We can explain only a part of the difference in the labour market performance of migrants relative to natives by observable human capital characteristics, i.e. by education and work experience Moreover, skilled immigrants replace less native workers than unskilled do The welfare state channel The fiscal benefits of the welfare state increase with the skill level of immigrants (Bonin 2014; Brücker et al, 2002, Brücker 2013).

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Can migration reduce the sustainability gap? Migration affects the fiscal balance of the welfare state via the tax-transfer mechanism and some other channels It is useful to distinguish transfers within an age cohort (e.g. via unemployment- and mean-tested benefits) and across age cohorts (via pensions, health insurance etc.) As a stylized fact migrants receive more tax-based benefits (mean-tested benefits such as Hartz-IV), but less contribution based benefits (pensions, health insurance) In principle, given that immigrants have in most countries a lower labour participation, pay less taxes and receive more transfers, but are much younger than the population average and contribute more to the pension system, the effects are likely to be ambiguous

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Direct effects: controversies Can we attribute the individually non-attributable proportionally on migrant population? The answer depends on whether goods are public goods (defense) or club goods (transport, administration), scale economies exist, the goods are proportionally used by immigrants/natives. Moreover, can we attribute the public debt service and the revenues from government wealth also proportionally on immigrants and natives?

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Indirect effects Immigration increases income of natives as well (capital income, wage sum of complementary workers) These persons pay taxes and social security contributions as well These effects can be considered in general equilibrium framework which calculated all kind of changes in prices, earnings and income Note that these effects can be large: about 40 per cent of the additional income created through immigration accrue to natives, 60 per cent to immigrants

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Integration of Labour Markets Dynamic vs. static effects Most studies calculate only current impact on government revenues and expenditures However, since many effects result in the long-term, we have to calculate the dynamic effects as well E.g. generational accounting, calculates net present value (or costs) of all revenues and expenditures over the lifecycle of representative native and immigrant cohorts, cohort by cohort under certain assumptions on skill structure and labour market integration of future immigrants (Bonin, 2014) Does not consider indirect effects. For doing this, more complex overlapping generation models are needed. Do not exist for Germany